Interest Rate Lock

[retire@40]

There is a minimum level of return that we would all want to get.  If you were to lock in all your investments for the rest of your life at a GUARANTEED interest rate, what would the MINIMUM rate be?

 

[justin]

Real or nominal?

 

[uncledrz]

I am assuming that the rate is not real, but nominal. Therefore, I do not see how one can lock up all investments at a set rate for the rest of life. Many on this board can remember US Treasuries at 15%.

 

[REWahoo]

Many on this board can remember US Treasuries at 15%.

I remember my dad being amazed in the mid-80's that he could get a 3 year CD at the local Savings & Loan that paid 17%.

REW

 

[laurence]

I'd be willing to play the odds at some point. Anybody want to give me US T-bills at 75% right now?

 

[retire@40]

Real or nominal?

Nominal.

I know that the real rate may be more meaningful at an individual level, but this is to say, for example, would you lock all your money in long-term treasuries if they could give you a certain nominal rate of return for the rest of your life?

With 12 people voting so far, it looks like if long-term rates (30-year bond) ever hit 7%, that is when people would start jumping in. Below that, nobody is willing to commit their money in a long-term lockup. That was my gut feeling too before the poll.

 

[unclemick]

Perhaps - if I lock in the 12-15% rates for a 30 yr Treasury - like the good old days.

On second thought - maybe not.

 

[retire@40]

Perhaps - if I lock in the 12-15% rates for a 30 yr Treasury - like the good old days.

On second thought - maybe not.

You're kidding, right?

 

[unclemick]

I worked with a guy (the one who hired me for my 95 temp job) who bought a bushel basket of bonds circa 80-82 and was bitching because some in 95 - not the treasuries - some others were getting called.

He took early out - 57 within a year after my temp stint. I know two others who left early in that time frame.

Heh, heh, heh - I like to think - I offered the proper bad influence.

 

[lazyday]

With 12 people voting so far, it looks like if long-term rates (30-year bond) ever hit 7%, that is when people would start jumping in. Below that, nobody is willing to commit their money in a long-term lockup. That was my gut feeling too before the poll.

There is a huge difference to me, between buying some 30 year treasuries, and locking up all my assets at a fixed nominal rate til I die.

For the former, I might start biting at 7 or 8%, and have a significant holding at 10 or 12%. Would have to do research&thinking though.

For the latter, maybe would accept 15 or 20%. Not sure I would though. Maybe if it could be in a basket of currencies/nations. Can I invest the interest anywhere, or does that have to go into the same bonds too?

 

[MJ]

Perhaps - if I lock in the 12-15% rates for a 30 yr Treasury - like the good old days.

On second thought - maybe not.

Yeh, that would b great if we also want to pay $3 for either a quart of milk or a quart of gas.

 

[dex]

I put in 8% figuring an after tax rate of 5%.
Assuming a 4% spending rate increase I would be OK.

I would leave an estate of 3.5m - that is what my spread sheet says anyway.

 

[Nords]

With 12 people voting so far, it looks like if long-term rates (30-year bond) ever hit 7%, that is when people would start jumping in.

Hmmm, 4% withdrawals and 3% inflation over a 30-year retirement life expectancy. I can see that.

I sat next to a man at a Schwab seminar who was facing the expiraton of the 30-year Treasury bonds in his portfolio. IIRC he'd purchased them in 1974 at 9%. He'd been pretty unhappy with them in the late '70s/early '80s but he was even more unhappy in 2004...

 

[retire@40]

Hmmm, 4% withdrawals and 3% inflation over a 30-year retirement life expectancy.  I can see that.

That's the way I look at it too. For me 7% would be the minimum, although if I had a gut feeling rates were going up even more (ala early 80s) and decided to be a little greedy, I would wait for an 8% lock and wouldn't look back.

I need more than a 30-year lock, but 30-year treasuries are the longest term guaranteed vehicle I know of.